In-House Counsel Should Pay Attention to Court Rulings in FRAND Litigation

In-house legal departments for companies that make products connected to data or phones should consider keeping up with how courts are ruling in litigation concerning standard essential patents, a group of Kirkland & Ellis attorneys said Wednesday in a roundtable call with members of the media.

A standardized essential patent on an invention must be used to comply with a technical standard. Because these inventions are standard in items like telephones, routers and laptops, patent infringement litigation is common and courts often award fair, reasonable and nondiscriminatory, or FRAND, royalty rates for use of these patents.

Right now, there is not a “clear central forum for a FRAND” royalty rate, Katie Coltart, an intellectual property litigation partner at Kirkland & Ellis in London, said during the call.

In England, Conversant LLC sued Chinese cellphone maker Huawei for patent infringement over the use of a piece of technology that is standard in implementing 3G. Lower British courts have determined that global FRAND rates can be set by British courts, while Huawei argued the rates should be set by Chinese courts.

“This is an example of the law and legal developments driving the negotiation of commercial terms,” Coltart said. “If you’re a technology company you need to make sure your legal teams are following this.”

Another issue U.S. companies should be paying attention to is whether the courts require standardized essential patent holders to license the patent to anyone who requests it, said Reza Dokhanchy, an IP litigation partner at Kirkland & Ellis in San Francisco.

In May, a federal judge ruled in a case brought by the Federal Trade Commission that Qualcomm Inc., a standardized essential patent holder, must license its patent to rival modem chip suppliers. However, in August, Qualcomm was granted a stay and indicated it plans on appealing the ruling.

Courts are ruling differently and Steve Baldwin, an IP litigation associate at Kirkland & Ellis in London, said he has not seen the different courts look to each other to set what the royalties should be.

“The only thing we’ve seen so far is that an English court may take into account what a Chinese court rules,” Baldwin said.

FRAND litigation is expected to ramp up with the introduction of 5G technology. Tiana Zhang, an IP litigation partner at Kirkland & Ellis in Shanghai, said the automotive industry will likely be subject to these suits as more cars require some kind of data connection. Along with self-driving vehicles, Zhang added these newer vehicles will require standardized essential patents to stay connected.